Download this Paper Open PDF in Browser

Corporate Groups

German and Nordic Perspectives on Corporate and Capital Market Law 157-200 (Holger Fleischer, Jesper Lau Hansen & Wolf Georg Ringe eds., 2015)

SAFE Working Paper No. 66

44 Pages Posted: 23 Sep 2014 Last revised: 31 May 2016

Tobias H. Troeger

Goethe University Frankfurt - Faculty of Law; Goethe University Frankfurt - Research Center SAFE; European Banking Institute

Date Written: September 22, 2014

Abstract

This paper contrasts the recent European initiatives on regulating corporate groups with alternative approaches to the phenomenon. In doing so it pays particular regard to the German codified law on corporate groups as the polar opposite to the piecemeal approach favored by E.U. legislation.

It finds that the European Commission’s proposal to submit (significant) related party transactions to enhanced transparency, outside fairness review, and ex ante shareholder approval is both flawed in its design and based on contestable assumptions on informed voting of institutional investors. In particular, the contemplated exemption for transactions with wholly owned subsidiaries allows controlling shareholders to circumvent the rule extensively. Moreover, vesting voting rights with (institutional) investors will not lead to the informed assessment that is hoped for, because these investors will rationally abstain from active monitoring and rely on proxy advisory firms instead whose competency to analyze non-routine significant related party transactions is questionable.

The paper further delineates that the proposed recognition of an overriding interest of the group requires strong counterbalances to adequately protect minority shareholders and creditors. Hence, if the Commission choses to go down this route it might end up with a comprehensive regulation that is akin to the unpopular Ninth Company Law Directive in spirit, though not in content. The latter prediction is corroborated by the pertinent parts of the proposal for a European Model Company Act.

Keywords: Corporate Groups, Related Party Transactions, Tunneling, Corporate Governance, E.U. Corporate Law, Shareholder Rights Directive, Group Interesterest, Minority Shareholder Protection, Creditor Protection

JEL Classification: D23, D62, K22

Suggested Citation

Troeger, Tobias H., Corporate Groups (September 22, 2014). German and Nordic Perspectives on Corporate and Capital Market Law 157-200 (Holger Fleischer, Jesper Lau Hansen & Wolf Georg Ringe eds., 2015); SAFE Working Paper No. 66. Available at SSRN: https://ssrn.com/abstract=2500101 or http://dx.doi.org/10.2139/ssrn.2500101

Tobias Hans Tröger (Contact Author)

Goethe University Frankfurt - Faculty of Law ( email )

Grüneburgplatz 1 (Westend Campus)
Frankfurt, 60323
Germany
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)

HOME PAGE: http://www.jura.uni-frankfurt.de/43940696/English-Version

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://safe-frankfurt.de/research/all-researchers/researchers-details/showauthor/prof-dr-tobias-troe

European Banking Institute ( email )

Frankfurt
Germany

Paper statistics

Downloads
355
Rank
69,042
Abstract Views
1,385